Baird Midcap Fund Celebrates 10th Anniversary

Baird MidCap Fund (Institutional Class symbol: BMDIX) crossed the 10-year mark December 31, 2010. In recognition of this milestone, Baird interviewed portfolio manager Chuck Severson who has managed the fund since its inception and is a 17-year mid cap stock investment veteran.

You believe Mid-Cap Stocks are uniquely positioned to capitalize on growth opportunities. Is your enthusiasm about this asset class still strong?Mid-cap stocks represent over 20% of the market and continue to offer a compelling opportunity. Mid-cap stocks have historically provided greater returns than large-cap stocks without the volatility associated with small-cap companies. Mid-caps are better positioned than larger companies to adjust their business strategies and capitalize on change. They are well-enough established not to be speculative, yet they remain nimble enough to pursue opportunities and, though not bureaucratic, are more likely to have effective sales, distribution and administrative systems firmly in place.

Are you looking for fast growing companies?We are growth managers, and in an effort to produce dependable results we emphasize quality, control of risk, and take a long term perspective. We seek a modestly lower average market cap than the benchmark in order to invest in companies a little earlier in their life cycle to pick up additional growth potential. We seek to find companies that can grow faster than their peers and try to make investments when the company is in the $2-4 billion market cap range.

We also aggressively harvest gains. For example, when we saw our companies post outsized gains after the recovery from the 2008 downturn, we sold portions of our top performers and tried to spread the risk. Generally, when more speculative stocks dominate the market, we generally haven’t participated as much on the upside. But in more challenging times, our fund has tended to be more dependable and predictable. Again, managing risk is important to our process.

How are you positioned coming out of the recession?We are now investing in early to mid-cycle companies. Going back to early 2009, we have had a pro-cyclical bias to the MidCap Fund. We believed that businesses would come out of recessions in better shape than consumers, and that capital spending would remain positive. We’ve maintained a full weight in the technology sector. We believed industrial companies would take another in a series of steps to improve their results and would continue to be run better. We also made a concerted effort to have significant exposure to industrial companies with international exposure.

On the consumer side, a lot of the early-cycle domestic-focused businesses have already performed well. We’ve transitioned into auto and truck businesses. An example is Gentex Corporation (GNTX), a global leader in auto dimming mirrors with a growing share of content produced for each car. Also, a government mandate requiring vehicles to have a rear camera display will allow them to participate in even greater per-car content. Another vehicle supplier we like is WABCO (WBC) which produces antilock and air breaking devices for commercial trucks. WABCO also has a lot of global exposure. Both WABCO and Gentex are considered consumer discretionary stocks, but they have a much longer cycle.

Has your fund sought investments in growth companies abroad?We predominantly invest in U.S. based companies. However, we have sought companies who are finding a lot of their growth abroad. On the technology side, there is NetApp (NTAP), Varian Semiconductor Equipment (VSEA); and ANSYS (ANSS). On the industrial side, we like Manpower (MAN), Roper Industries (ROP), Mettler Toledo (MTD). All have a significant international weight to their total revenue. Even in a modest domestic growth environment, we want to be involved in markets that are growing much faster.

What is your outlook for 2011?We think the rising economic tide will be helpful for stocks, and we hope to meaningfully participate and benefit from that. But our approach will not change. We will continue to investigate and find investments in companies we think are terrific businesses regardless of the economic cycle.

What about your fund’s approach to expenses?Similar to other funds in the Baird Family of Funds, we don’t have to overcome a heavy expense burden. At .85% on the institutional share class and 1.10% on the retail share class, our expense ratio is lower than the average mid-cap fund within Morningstar’s Mid-Cap Growth category.

About Chuck Severson, CFAChuck Severson is Senior Portfolio Manager with Baird Investment Management and part of a mid cap growth investment team composed of five senior investment professionals, each with extensive investment experience and diverse backgrounds. Chuck has more than 23 years of investment experience and earned a Master of Science Degree in Finance in 1987 and BBA degree in 1982 from the University of Wisconsin – Madison where he was a member of the Applied Security Analysis Program. He earned the Chartered Financial Analyst designation in 1991.

About Baird FundsThe Baird Funds family offers a full range of both fixed income mutual funds managed by Baird Advisors, and equity mutual funds managed by Baird Investment Management (BIM). The seasoned investment professionals of Baird Advisors and BIM use proven, disciplined investment approaches that seek to deliver consistent, competitive returns to mutual fund shareholders. For more information, visit bairdfunds.com.

About BairdBaird is an employee-owned, international wealth management, capital markets, private equity and asset management firm with offices in the United States, Europe and Asia. Established in 1919, Baird has more than 2,400 associates serving the needs of individual, corporate, institutional and municipal clients. Baird oversees and manages client assets of more than $75 billion. Committed to being a great place to work, Baird ranked number 11 on FORTUNE’s “100 Best Companies to Work For” in 2010 – its seventh consecutive year on the list. Baird’s principal operating subsidiaries are Robert W. Baird & Co. in the United States and Robert W. Baird Group Ltd. in Europe. Baird also has an operating subsidiary in Asia supporting Baird’s private equity operations. For more information, please visit Baird’s Web site at rwbaird.com.

Information through 12/31/10:

Average Annual Total Returns as 12/31/2010

Baird MidCap Fund

1 Yr

5 Yrs

10 Yrs

Institutional Class

27.1%

5.6%

4.6%

Investor Class

26.9%

5.4%

4.3%

Russell MidCap® Growth Index

26.4%

4.9%

3.1%

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment returns and principal value of an investment in the fund will fluctuate so that an Investor’s shares, when redeemed, may be worth more or less than their original cost. The fund’s current performance may be lower or higher than this performance data. To obtain performance data current to the most recent month end, please visit bairdfunds.com.

The Net Expense Ratio is the Gross Expense Ratio minus any reimbursement from The Advisor. The Advisor has contractually agreed to limit the Baird MidCap Fund's Total Annual Operating Expenses to 1.10% of average net assets for the Investor Class Shares and 0.85% of average net assets for Institutional Class Shares of the Fund, at least through April 30, 2011. The Gross Expense Ratio for the Baird MidCap Fund’s Institutional Class Shares is 1.19% and the Gross Expense Ratio for the Baird MidCap Fund’s Investor Class Shares is 1.44%.

Minimum investment for the Fund is $25,000. The performance of Baird MidCap Fund is measured against the Russell Midcap® Growth Index, a mid-cap index that measures the performance of those Russell Midcap companies with higher price-to-book and higher forecasted growth values. The stocks are also member of the Russell 1000® Index. This is an unmanaged common stock index that is generally representative of the U. S. Stock market. An investment cannot be made directly in an index.

Fund (Class)

Morningstar®Category

Overall Morningstar RatingTM As Of 12/31/2010

# Of Overall Funds

Baird MidCap Fund (Instl)

Mid-Cap Growth

««««

677

Data as of 12/31/2010

Morningstar RatingTMMorningstar Category - Mid-Cap Growth

Year

Rating

Funds

For each fund with at least a three year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads and redemption fees), placing more emphasis on downward variations and rewarding consistent performance.

The overall Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Ratings metrics.

3

««««

677

5

«««

594

10

««««

392

Overall

««««

677

For each fund with at least a three year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads and redemption fees), placing more emphasis on downward variations and rewarding consistent performance.

The Overall Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics.

For each fund with at least a three year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)

This is not a complete analysis of every material fact regarding any company, industry or security. The opinions expressed here reflect our judgment at this date and are subject to change. The information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy. Additional information about the companies mentioned are available upon request.

The Fund invests a substantial portion of its assets in the stocks of mid-capitalization companies. Mid-capitalization companies often are more volatile and face greater risks than larger, more established companies. The Fund focuses on growth-style stocks and therefore the performance of the Fund will typically be more volatile than the performance of funds that focus on types of stocks that have a broader investment style. The Fund may invest up to 15% of its total assets in foreign securities and ADRs. Foreign investments involve risks such as currency rate fluctuations, different and sometimes less strict financial reporting standards and regulation, and the potential for political and economic instability.

Investors should consider the investment objectives, risks, charges and expenses of each fund carefully before investing. This and other information is found in the prospectus. For a prospectus and application, contact Baird Funds directly at 800-444-9102, at bairdfunds.com, via e-mail, or contact your Baird Financial Advisor. Please read the prospectus carefully before investing.